Senate Bill 1350

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    Florida Senate - 1999                                  SB 1350

    By Senator Geller





    29-1197-99

  1                      A bill to be entitled

  2         An act relating to insurance; providing an

  3         insurance compliance self-evaluation privilege

  4         for insurers and persons conducting activities

  5         regulated under the Florida Insurance Code who

  6         conduct voluntary internal audits of their

  7         compliance programs and management systems to

  8         improve compliance with state and federal law;

  9         providing that such audit documents are

10         privileged and not discoverable or admissible

11         as evidence in any civil, criminal, or

12         administrative proceeding; providing

13         conditions; providing for inapplicability of

14         the privilege under certain circumstances;

15         authorizing the court to require disclosure

16         upon making a determination that the assertion

17         of the privilege is fraudulent or that the

18         material is not subject to the privilege;

19         prescribing documents to which the privilege

20         does not apply; providing definitions;

21         providing an effective date.

22

23  Be It Enacted by the Legislature of the State of Florida:

24

25         Section 1.  Insurance compliance self-evaluation

26  privilege.--

27         (1)(a)  To encourage insurance companies and persons

28  conducting activities regulated under the Florida Insurance

29  Code to conduct voluntary internal audits of their compliance

30  programs and management systems and to assess and improve

31  compliance with state and federal laws, an insurance

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    Florida Senate - 1999                                  SB 1350
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  1  compliance self-evaluation privilege is recognized to protect

  2  the confidentiality of communications relating to voluntary

  3  internal compliance audits. The Legislature finds that

  4  protection of insurance consumers is enhanced by companies'

  5  voluntary compliance with this state's insurance laws and

  6  other laws and that the public will benefit from incentives to

  7  identify and remedy insurance and other compliance problems.

  8  The Legislature further finds that limited expansion of the

  9  protection against disclosure will encourage voluntary

10  compliance and improve insurance market conduct quality.

11         (b)1.  Except as provided in paragraphs (c) and (d), an

12  insurance compliance self-evaluation audit document is

13  privileged and is not discoverable or admissible as evidence

14  in any civil, criminal, or administrative proceeding. This

15  privilege is a matter of substantive law and is not merely a

16  procedural matter governing civil or criminal procedures.

17         2.  If any company, person, or entity performs or

18  directs the performance of an insurance compliance audit, an

19  officer, employee, or agent involved with the insurance

20  compliance audit or any consultant who is hired for the

21  purpose of performing the insurance compliance audit may not

22  be examined in any civil, criminal, or administrative

23  proceeding as to the insurance compliance audit or any

24  insurance compliance self-evaluation audit document. This

25  subparagraph does not apply if the privilege provided in

26  subparagraph 1. is determined under paragraph (c) or paragraph

27  (d) to be inapplicable.

28         3.  Except as provided in paragraph (d):

29         a.  Voluntary disclosure of an insurance compliance

30  self-evaluation audit document to the Insurance Commissioner,

31  the Department of Legal Affairs, or any state attorney does

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    Florida Senate - 1999                                  SB 1350
    29-1197-99




  1  not constitute a waiver of the privilege set forth in

  2  subparagraph 1.

  3         b.  Any compliance self-evaluation audit document

  4  voluntarily disclosed to the Insurance Commissioner, the

  5  Department of Legal Affairs, or any state attorney remains the

  6  property of the company and is not subject to disclosure under

  7  chapter 119, Florida Statutes.

  8         (c)1.  The privilege set forth in paragraph (b) does

  9  not apply to the extent that it is expressly waived by the

10  company that prepared or caused to be prepared the insurance

11  compliance self-evaluation audit document.

12         2.  In a civil proceeding, a court of record may, after

13  an in-camera review, require disclosure of material for which

14  the privilege set forth in paragraph (b) is asserted, if the

15  court determines that:

16         a.  The privilege is asserted for a fraudulent purpose;

17  or

18         b.  The material is not subject to the privilege.

19         (d)  The privilege set forth in paragraph (b) does not

20  apply in any criminal or administrative proceeding initiated

21  by the Insurance Commissioner, the Department of Legal

22  Affairs, or any state attorney, upon the filing of formal

23  administrative or criminal charges against the company. Any

24  compliance self-evaluation audit document produced to the

25  Insurance Commissioner, the Department of Legal Affairs, or

26  any state attorney under this paragraph or otherwise in the

27  possession of the Insurance Commissioner, the Department of

28  Legal Affairs, or any state attorney at the time formal

29  administrative or criminal charges are filed against the

30  company is subject to disclosure under chapter 119, Florida

31  Statutes.

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    Florida Senate - 1999                                  SB 1350
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  1         (e)1.  A company asserting the insurance compliance

  2  self-evaluation privilege set forth in paragraph (b) has the

  3  burden of demonstrating the applicability of the privilege.

  4  Once a company has established the applicability of the

  5  privilege, the party seeking disclosure under sub-subparagraph

  6  (c)2.a. has the burden of proving that the privilege is

  7  asserted for a fraudulent purpose.

  8         2.  The parties may stipulate in proceedings under

  9  paragraph (c) or paragraph (d) to whether the entry of an

10  order directing that specific information contained in an

11  insurance compliance self-evaluation audit document is subject

12  to the privilege provided under paragraph (b). Any such

13  stipulation may be limited to the instant proceeding and,

14  absent specific language to the contrary, does not apply to

15  any other proceeding.

16         (f)  The privilege set forth in paragraph (b) does not

17  extend to:

18         1.  Documents, communications, data, reports, or other

19  information expressly required to be collected, developed,

20  maintained, or reported to a regulatory agency under the

21  Florida Insurance Code or other federal or state law;

22         2.  Information obtained by any regulatory agency

23  through observation or monitoring; or

24         3.  Information obtained from a source independent of

25  the insurance compliance audit.

26         (g)  As used in this section, the term:

27         1.  "Insurance compliance audit" means a voluntary,

28  internal evaluation, review, assessment, audit, or

29  investigation for the purpose of identifying or preventing

30  noncompliance with or promoting compliance with laws,

31  provisions of this code, rules adopted thereunder, or

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    Florida Senate - 1999                                  SB 1350
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  1  departmental orders which is conducted by or on behalf of a

  2  company in reaction to a specific occurrence, circumstance, or

  3  activity.

  4         2.  "Insurance compliance self-evaluation audit

  5  document" means a document prepared as a result of or in

  6  connection with an insurance compliance audit. An insurance

  7  compliance self-evaluation audit document may include a

  8  written response to the findings of an insurance compliance

  9  audit. An insurance compliance self-evaluation audit document

10  may include, but is not limited to, field notes and records of

11  observations, findings, opinions, suggestions, conclusions,

12  drafts, memoranda, drawings, photographs, exhibits,

13  computer-generated or electronically recorded information,

14  phone records, maps, charts, graphs, and surveys, provided

15  that this supporting information is created for the sole

16  purpose and in the course of an insurance compliance audit. An

17  insurance compliance self-evaluation audit document does not

18  include any document prepared before the commencement of an

19  insurance compliance audit. An insurance compliance

20  self-evaluation audit document also includes, but is not

21  limited to:

22         a.  An insurance compliance audit report prepared by an

23  auditor, who may be an employee of the company or an

24  independent contractor, which report may include the audit

25  conclusions and recommendations;

26         b.  Memoranda and documents analyzing portions or all

27  of the insurance compliance self-evaluation audit report and

28  discussing potential implementation issues;

29         c.  An implementation plan that addresses correcting

30  past noncompliance, improving current compliance, and

31  preventing future noncompliance; or

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    Florida Senate - 1999                                  SB 1350
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  1         d.  Analytic data generated in the course of conducting

  2  the insurance compliance self-evaluation audit.

  3         3.  "Company" means an authorized insurer as defined in

  4  section 624.09, Florida Statutes.

  5         (h)  The insurance compliance self-evaluation privilege

  6  created by this section applies to all civil proceedings

  7  pending on the effective date of this section.

  8         (2)  Nothing in this section nor the release of any

  9  self-evaluation audit document under this section limits,

10  waives, or abrogates the scope or nature of any statutory or

11  common law privilege, including, but not limited to, the work

12  product doctrine, the attorney-client privilege, or the

13  subsequent remedial measures exclusion.

14         Section 2.  This act shall take effect July 1, 1999.

15

16            *****************************************

17                          SENATE SUMMARY

18    Provides an insurance compliance self-evaluation
      privilege for insurers and persons conducting activities
19    regulated under the Florida Insurance Code who conduct
      voluntary internal audits of their compliance programs
20    and management systems to improve compliance with state
      and federal law. Provides that such audit documents are
21    privileged and not discoverable or admissible as evidence
      in any civil, criminal, or administrative proceeding.
22    Provides conditions. Provides for inapplicability of the
      privilege under certain circumstances. Authorizes the
23    court to require disclosure upon making a determination
      that the assertion of the privilege is fraudulent or that
24    the material is not subject to the privilege. Provides
      documents to which the privilege does not apply. Provides
25    definitions.

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